Nufarm could benefit from big mergers

Nufarm expects that current consolidation in the global crop protection sector will provide it with opportunities to pick up assets.
 

Nufarm chairman Donald McGauchie told shareholders at the company's annual general meeting (AGM) on Thursday that five of the top six global crop protection firms are now involved in merger and acquisition processes.
 

Potential mergers included Monsanto and Bayer; Dow and DuPont; and ChemChina with Syngenta.
 

Regulators were likely to order the merged entities to sell some assets because of competition concerns, and the merged entities could decide to divest some businesses.
 

"This could provide opportunities for Nufarm if we see strategic opportunities that complement our portfolio, fit with our strategy and are commercially sound," Mr McGauchie said.
 

Nufarm managing director Greg Hunt said after the AGM that the potential merger deals were still in the early stages and under consideration by regulators.
 

"There's a lot of speculation, but we would expect to see across the whole portfolio herbicides, pesticides and fungicides products being divested," Mr Hunt said.
 

"But in terms of who and what size and what timing, it's just too early."
 

Mr Hunt also said Nufarm was confident that underlying earnings for the first half of the fiscal year would be ahead of the prior year, which would leave Nufarm well placed to deliver solid underlying earnings growth for the full year.
 

Mr Hunt said Nufarm's operations in Australia and Brazil, which usually dominate the first-half results, were experiencing competitive market conditions.
 

But the North American business was improving its contribution.
 

In Australia, in the first quarter, seasonal conditions were better than those experienced for some years because of above-average rainfall.
 

The outlook for summer cropping remains favourable, and the outlook for winter cropping is positive.
 

The North American business had stated the year very well, and a successful sales campaign in the turf and specialty sector would contribute to a better first-half result.
 

The Brazil market is expected to be down in US dollar terms for the 2016 calendar year, but increased crop plantings and recent product launches would deliver a solid first-half performance from Latin America.
 

Year-to-date sales in Europe were in line with the previous period, but the European business was positioned for another year of growth in the wake of a focus on high-value products, cost cuts and new product launches.
 

RBC Capital Markets analyst Andrew Scott said Nufarm's commentary was largely in line with expectations and pointed to another year of earnings growth.